Morgan Stanley (NYSE: MS) received upgrades on three of its commercial mortgage backed securities (CMBS) classes from Moody’s. Four other classes of CMBS included in the bank’s series 1999-WF1 package were affirmed at previously assigned ratings. The upgrades followed from Moody’s analysis that the cumulative expected loss has fallen from 8.6% to 4.5% of the current balance. The aggregate balance of the series is now $57.3 million from an original balance of $968.5 million at the time of securitization.

Wells Fargo & Co. (NYSE: WFC) subsidiary Wachovia Bank received downgrades on eight classes of CMBS in series 2006-C24 by Moody’s. Another 14 classes in the series were affirmed or confirmed and Moody’s also affirmed 16 classes in Wachovia’s CMBS series 2003-C7.

JPMorgan Chase & Co. (NYSE: JPM) received downgrades on six classes of CMBS series 2002-C2 and affirmations on 11 classes in the same series from Moody’s. The downgrades were due to higher expected losses of 6%, compared with 3.6% expected losses at the agency’s last review in December 2010.

Citigroup Inc. (NYSE: C) received a downgrade of 11 classes of its series 2006-C4 CMBS at Fitch Ratings. Two of the three largest loss contributors are in foreclosure. Six other classes in the series were affirmed. The total downgraded amount is more than $400 million on an aggregate original balance of $2.26 billion.

These actions could just represent a flurry of activity on some poorly performing loans, or they could be a signal that more write-downs on commercial lending could be in store.

Ford Motor Co. (NYSE: F) has had its ‘BB-’ corporate credit watch put on CreditWatch with positive implications by Standard & Poor’s. The possible two-notch upgrade to ‘BB+’ depends on the company’s successful negotiations for a new four-year union contract. The company has also said that it could add up to 7,000 new jobs in the US over the next two years.

General Motors Co. (NYSE: GM) received a two-notch upgrade to its corporate credit rating, from ‘BB-’ to ‘BB+’, at S&P. The rating outlook was also raised from ‘stable’ to ‘positive’. The upgrade follows yesterday’s United Auto Workers’ ratification a new four-year labor contract with GM.

Liberty Interactive Corp. (NASDAQ: LINTA) received a an upgrade to its corporate credit rating from ‘BB-’ to ‘BB’ at S&P. The agency also removed company from CreditWatch Negative and affirmed its ‘stable’ outlook. The change stems from the spin-off of Liberty’s QVC, Inc.

Thomson Reuters Inc (NYSE: TRI) received a rating of ‘A-’ on approximately $2.9 billion in 10-year unsecured notes maturing in 2013, 2014, and 2015. Thomson has also announced an offering of $350 million in 3.95% notes due in 2021. The company will use the proceeds to repay borrowing on its commercial paper that had been used to finance a repayment of CDN$600 million on 5.25% notes that matured in July 2011. Thomson also appointed a new COO yesterday, who could be in line to replace the CEO if Thomson doesn’t improve its performance in the financial services sector.

Paul Ausick

This follows a decision last November by Comcast Corp. (NASDAQ: CMSCA) to charge Internet broadband provider Level 3 Communications Inc. (NASDAQ: LVLT) more for the amount of bandwidth demanded by Level 3 customer Netflix. The fat pipes providers want more money from Netflix, and now the content producers also want either more money or to restrict access to new shows and movies. At the very least this poses the threat of a profit squeeze to Netflix, and at worst, threatens to choke off availability of new TV shows and movies to Netflix customers.

Both of Netflix’s antagonists are banking on squeezing the company’s profitability on the $8/month unlimited streaming service. If Netflix has to pay more for bandwidth and more for content (if it can get it), then it will have to get more customers or charge more or both. Getting more customers is costly or charging them more than $8/month when Amazon.com (NASDAQ: AMZN) is giving streaming movies away free with a $79 annual subscription to its Amazon Prime service could make Netflix profitability problematic.

To counter the production companies, Netflix recently announced that it would acquire first distribution rights to a new series directed by David Fincher and starring Kevin Spacey.  This move was clearly a shot across the bow of the studios, but apparently they aren’t about to surrender to Netflix.

Before Netflix had 20 million subscribers, the studios and production companies were glad to have the additional revenue stream. Now that Netflix has crushed Blockbuster, the content providers want to make up that revenue either by squeezing Netflix for more money or by setting up their own streaming services and cutting Netflix out altogether.

A betting man might say that the content providers are destined to prevail in this struggle, but Netflix has some very strong cards to play. One is expansion outside North America. The company’s ability to expand its streaming business is probably unequaled by any of the content providers. Amazon, and potentially Facebook, could compete with Netflix globally, but Showtime or Starz need Netflix to get their shows out.

Netflix’s streaming business is cannibalizing its DVD rental business, and its $8/month unlimited streaming package is not generating enough profit to make up the losses. But that will change at some point as mailing and handling costs drop. As long as the company doesn’t have to pay enormous fees for bandwidth, this is a long-run positive for Netflix.

Netflix has just been too successful for its partners not to notice. They have to try to regain the revenues they’ve passed along to Netflix. The TV channels and movie studios don’t want to end up in the same position as the recorded music industry, where digital distribution has decimated revenues and profits.

Paul Ausick

A report on Hollywood insider news site Deadline.com broke the story that Netflix is interested in a first-showing distribution deal for up to 26 episodes of a TV series directed by David Fincher (“The Social Network”) and starring Kevin Spacey.  At an estimated $4 million-$6 million per episode, the deal would cost Netflix more than $100 million, although The Wall Street Journal cites a source who believes Netflix “is likely to pay much less than that.”

Netflix has previously shied away from producing original content, but new competition from Amazon.com (NASDAQ: AMZN), which now offers free streaming to customers of its Amazon Prime program, and Facebook, which has struck a deal with Time Warner Inc. (NYSE: TWX) to stream “The Dark Knight” from the Warner Bros. studio, could be driving Netflix to look beyond just renting DVDs and video streams. Netflix is also facing higher fees from movie makers like Lions Gate Entertainment Corp. (NYSE: LGF) and MGM.

When Netflix began its mail-order service, the movie studios saw this as just another wrinkle to its already successful DVD rental business with bricks-and-mortar stores like Movie Gallery and Blockbuster. Those days are gone, and the studios are demanding higher fees and offering stricter terms to Netflix because they fear that the company will crush their own hopes for streaming content to viewers.

Netflix claims more than 20 million subscribers, more than the Showtime cable network owned by CBS Corp. (NYSE: CBS) or Starz, owned by Liberty Media Corp. (NASDAQ: LINTA). Time Warner’s HBO has 28 million subscribers, but Netflix should surpass that total before the end of the year.

The company is trying to improve the quality of its offerings, which includes older movies and TV shows, and is short of new and original content that commands a higher price and draws larger audiences. If the studios won’t sell the rights to Netflix at a reasonable cost and with less restrictive viewing schedules, then the company will produce its own content.

Or at least it will threaten to produce its own content. For example, if the deal for this series is a success, then Netflix can turn to the studios and networks and threaten to make more original content unless the company can get better deals on rental fees and rights to show current, popular TV series. The mavens will have to listen, and in fact, may have to yield to Netflix’s demands.

The studios and networks like being able to call the shots with respect to fees and schedules. They won’t give up that power without a fight.

Netflix has a lot riding on this deal, though. If it is successful, a lot of good things can happen. If it is not, the company will have spent a truckload of money for nothing and that won’t make shareholders very happy.

But Netflix has to try something, and this is not a huge risk. The company added 3 million new subscribers in the quarter ended December 2010. For every million subscribers, Netflix takes in about $100 million in revenue. Provided the company can keep growing and that its business is not seriously undermined by Amazon or Facebook, Netflix can afford to make this kind of bet.

Paul Ausick

“Well, my wife, who is very concerned about these things, moved all her personal cash to Australia and Canada. She wants to have a place to go if things blow up here. Canada has a lot more fiscal and bank responsibility than most places in the world and lots of natural resources. We have a retreat that’s right on the Quebec border. We own 18 miles on the border, so we can cross. Anytime we want to we can get away. It would probably be illegal but we could go. Actually our snowmobile trail goes right on the border.”

Liberty Media Corp. (NASDAQ: LINTA) yesterday reported quarterly results that calls into question Malone’s doomsday scenario. The  QVC home shopping business posted strong numbers with revenue increasing 5% in the second quarter to $1.8 billion and adjusted OIBDA increased 9% to $403 million.  QVC ‘s US business grew 21%, an astounding amount consider the shaky state of the economy. Starz Entertainment’s revenue increased 4% to $308 million while adjusted OIBDA increased 2% to $107 million and operating income increased 11% for the second quarter.   Indeed, his investments in Sirius Satellite Radio Inc.  (NASDAQ: SIRI) and Expedia Corp (NASDAQ: EXPE) and IAC/InterActive Corp (NASDAQ: IACI)  are doing well. All of the companies posted better-than-expected results.   Their shares are all up this year.

So what’s eating Malone? Taxes.  The entrepreneur has preserved his fortune by outflanking the IRS through a series of tracking stocks and tax-free spin-offs.  He usually prefers to stay in the background and does not say much on Liberty’s earnings conference calls.

Maybe Malone will get more faith in America if his investments continue to do well.

Jon Berr

The companies on the 24/7 Wall St. Worst Places for Women to Work list have no women on their boards and no women in senior management.  Any company on the list would have to: 1) completely lack sensitivity to the issues of women in the work place, or 2) have enough misgivings about women to insure that all the people who have any meaningful place in running their companies have to be men. It is hard to say whether these companies are “female-free” at the top tiers because of misogyny or dull-wittedness.  The practice of equal opportunity is missing at all of these companies.

Our analysis makes an assumption, but we believe it is a fair one. A company with no women on its board or in senior management is extremely unlikely to be concerned about the issue of disparity in pay by gender  and is likely to perform worse than the national census average in terms of what it pays its non-executive female management and its women rank-and-file employees.

24/7 Wall St.’s 1o Worst Places For Women To Work:
1. Phillip Morris (PM) is one of the largest tobacco companies in the world and has nearly 75,000 employees. Women are often assigned to run human resources and corporate communications departments at companies where men dominate the management, and PM is no exception. The highest ranking corporate executive is Daniele Regorda, vice president of human resources. Phillip Morris claims that the company is “always striving to broaden the diversity of our workforce and are continuously working to identify, hire and retain the best qualified individuals, wherever they are located or whatever their background.” No wonder they call him the Marlboro Man. Nine board members, zero women.

2. Icahn Enterprises (IEP) is a diversified holding company with around 47,000 employees. Billionaire investor Carl Icahn is the firm’s chairman. Women looking for executive positions at the company can contact Icahn Enterprises, 767 Fifth Avenue, 47th Floor, New York, NY, 10153. Icahn can afford a female board member.

3. Virgin Media (VMED) is in the mobile telephone and broadcast business, and has 13,380 employees. Virgin is based in the UK and is part of the Richard Branson collection of companies. Branson is a media star among global corporate chiefs. The firm has 11 directors, all of which are, you guessed it, men. The senior female member of the Virgin Media management is Elisa Nardi, Chief People Officer, or head of human resources.

4. Liberty Media (LINTA) has a $7.7 billion dollar market value.  This part of cable and content king John Malone’s empire has about 19,000 employees and holds a number of satellite broadcast and content assets including assets in QVC, Starz, and Expedia. The company has nine directors including Malone. No women executives are listed at the corporation’s website.

5. L-3 (LLL) Holdings provides military technology and employs 66,000 people. It is the sixth largest defense company in the United States. L-3 as nine directors. There are no women in executive management but the head of employee benefits and general counsel are both women. It is almost impossible to understand why the federal government would sanction this.

6. EOG Resources (EOG) is an oil and natural gas company with 2,100 employees and a $23 billion market cap, which makes it one of the most valuable firms in its sector. The head of human resources and administration and the head of accounting are women.

7. Cameron International (CAM) provides equipment for the national gas and oil industries. The company has 17,000 employees, eight board members, no women in positions of major responsibility. Seven senior executives are listed in the proxy–all male. Also, all board members but one are over 60–a sort of reverse age discrimination.

8. National Oilwell Varco (NOV) is an oilfield services company which provides mechanical components for oil and gas drilling projects. About 40,000 employees. Eight directors, none of which are women.

9. Emcor (EME) is an electrical and mechanical construction and facilities services company with 28,000 employees. The only female corporate executive is the head of corporate communications, and she is not considered “senior management” as the SEC defines the term.

10. XTO Energy (XTO) has 3,100 employees and a market cap of $27 billion. The firm prides itself on its ability to find and import oil and natural gas.  Apparently, they aren’t quite as concerned about scavenging for corporate gender diversity.

Honorable mention: Shaw Group (SHAW) is a diversified manufacturing company has nearly 28,000 employees. Its market cap at $3 billion is relative small. They have no female officers or directors either.

Douglas A. McIntyre

Updated 12.02 PM EST:  Wal-Mart (NYSE:WMT) will have a national roll-out of its “no contract” cellular service which could put sales pressure on Sprint (NYSE:S) (Reuters)

Updated 9.23 AM EST:  Rupert Murdoch’s News Corp (NYSE:NWS) and John Malone’s Liberty Media (NASDAQ:LINTA) are interested in GE’s NBCU  (Reuters & CNBC)

Apple (NASDAQ:AAPL) is shipping versions of its 3Gs iPhone with alterations to fight back at hackers.  (iClarified)

RBS (NYSE:RBS) may sell 300 branches.  (FT)

The head of AIG’s (NYSE:AIG) International Lease Finance aircraft leasing firm, Steven Udvar-Hazy, may buy $2 billion in planes from the huge insurance firm to start his own company.  (Bloomberg)

Comcast (NASDAQ:CMCSA) in interested in NBC Universal because it thinks it can buy the company well below its value because of GE’s (NYSE:GE) desperation to exit the business. Vivendi is playing hardball on the price of its 20% stake in NBCU (NYPost).

Net neutrality and the rise in the transfer of large data files will make the internet collapse (Ars Technica)

Former employees of Citadel Investment Group will start their own hedge fund  (WSJ)

The release of Microsoft’s (NASDAQ:MSFT) Windows 7 could push up Apple’s Mac sales.  (Fortune)

You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.

Douglas A. McIntyre

BT Group (BT) Raised to Overweight at JPMorgan.
Callaway Gold (ELY) Raised to outperform at JMP Securities.
CBS Corp. (CBS) Cut to Hold at Argus.
Citrix Systems (CTXS) Cut to Underperform at Jefferies.
Duke Energy (DUK) Cut to Perform at Oppenheimer.
Infosys (INFY) Raised to Buy at Deutsche Bank.
Liberty Media (LINTA) Raised to Overweight at JPMorgan.
Netezza (NZ) Raised to Overweight at JPMorgan.
Research In Motion (RIMM) Cut to Neutral at UBS.
VMware (VMW) Cut to Underperform at Jefferies.

JON C. OGG
AUGUST 10, 2009

American Express (AXP) Started as Underperform at RBC.
Buckle (BKE) Cut to Underweight at KeyBanc.
Ciena (CIEN) Cut to Underperform at JMP Securities.
Energy Conversion Devices (ENER) Cut to Hold at Citi; Cut to Neutral at Credit Suisse.
International Paper (IP) Cut to Hold at Deutsche Bank.
Liberty Media (LINTA) Cut to Sell at Citi.
Royal Bank of Scotland (RBS) Cut to Underperform at Credit Suisse.
StatoilHydro (STO) Cut to Hold at Societe Generale.
Taiwan Semiconductor (TSM) Cut To Market Perform at FBR.
Temple-Inland (TIN) Cut to Hold at Deutsche Bank.
ViaSat (VSAT) Cut to Hold at Collins Stewart.

JON C. OGG

The company will also have Game Show Network, FUN Technologies and the three regional sports networks. Liberty Entertainment Inc. will now be comprised of:

• approximately 54% of the common stock of DIRECT;
• Liberty Sports Holdings, which owns three regional sports networks;
• a 65% interest in Game Show Network (GSN) and FUN Technologies;
• approximately $30 million in cash in addition to cash generated by operations after March 31;
• $2 billion in debt.

DIRECTV will provide to LEI up to $650 million in funding pursuant to a term loan facility in order to service the LEI debt.

In the split-off, each holder of Series A Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series A common stock and will retain 0.1 of a share of Liberty Starz stock; each holder of Series B Liberty Entertainment group tracking stock will receive 0.9 of a share of LEI Series B common stock and will retain 0.1 of a share of Liberty Starz stock for each share of Series B Liberty Entertainment group tracking stock held at the time of the split-off.

LEI and DIRECTV Group (DTVG) will merge with subsidiaries of a newly formed subsidiary of DTVG that will be called DIRECTV. DIRECTV will become the parent company of DTVG and LEI. DIRECTV will have two classes of stock, Class A which will be entitled to one vote per share and Class B which will be entitled to 15 votes per share. In the DTVG merger, DTVG shareholders will receive one share of DIRECTV Class A common stock for each share of DTVG common stock held. The holders of LEI Series A and Series B common stock (other than John Malone, his wife and associated trusts) will receive 1.1111 shares of DIRECTV Class A common stock for each share of LEI Series A or Series B common stock held. John Malone, his wife and associated trusts will receive 1.1111 shares of DIRECTV Class B common stock for each share of LEI Series B common stock held.

This has been a very confusing story for years.  The new structure does not seem that much less complicated on the surface.  We have heard of many shareholders who have refrained from investing in the Liberty companies because they have had too hard of a time determining what they really own in each class of stock.  And after reading the above scenarios it may be good to ask yourself if the structure sounds easy to explain now……..

JON C. OGG

Under terms of the deal,  Malone’s Liberty will invest in Sirius XM.  The satellite radio provider and its lenders have also agreed to extend its outstanding loans which are due in May.

These transactions “should” resolve resolve the uncertainty over the company’s and its subsidiaries’ debt that is maturing in 2009.  The company says this DOES resolve it, but we argue it SHOULD resolve it.

Sirius XM also announced that the term loan and revolving loan for  XM Satellite Radio, a subsidiary of Sirius XM,  been rolled into a single term-loan facility of $350 million.

Liberty will loan $150 million to XM Satellite Radio to repay a portion of the  10% convertible notes due December 1 issued by its former corporate parent.  Sirius XM has granted Liberty 12.5 million shares of new preferred stock convertible into 40% of the common stock of Sirius XM.

Saying a $0.13 or $0.14 stock was “allowed to live” is a misnomer.  This company is living on life support and may be in a coma.  There are still many issues ahead for Sirius XM, and the shaky economy and plummeting auto sales  is just a small piece of the pie.

Sirius XM shares are up more than 6% today to $0.1384.

Jon C. Ogg
March 6, 2009